Note 2 — Acquisitions

On October 11, 2016, the Company acquired BlazeMeter Ltd. (“BlazeMeter”), a privately-held provider of open source-based continuous application performance testing. BlazeMeter will integrate with the Company’s continuous delivery solutions to further improve testing efficiency and accelerate the deployment of applications. The acquisition of BlazeMeter was not material to the Company’s financial position or results of operations for fiscal year 2017. The results of operations of BlazeMeter are reported predominantly in the Company’s Enterprise Solutions segment and were included in the consolidated results of operations of the Company from the date of acquisition.

On January 18, 2017, the Company completed its acquisition of Automic Holding GmbH (“Automic”), a privately-held provider of business process and IT automation software. With Automic, the Company added new cloud-enabled automation and orchestration capabilities across its portfolio and increased its ability to reach into the European market. The Company acquired 100% of the voting equity interest in Automic for approximately 630 million euros (which translated to approximately $675 million at January 18, 2017). The results of operations of Automic are reported predominantly in the Company’s Enterprise Solutions segment and were included in the consolidated results of operations of the Company from the date of acquisition.

On March 31, 2017, the Company completed its acquisition of Veracode, Inc. (“Veracode”), a privately-held provider of cloud-based security testing solutions for web, mobile and third-party applications across the software development lifecycle. With Veracode, the Company bridges its Security business with its broad DevOps portfolio and adds to its growing SaaS business. The Company acquired 100% of the voting equity interest in Veracode for approximately $618 million in cash. The results of operations of Veracode are reported predominantly in the Company’s Enterprise Solutions segment and were included in the consolidated results of operations of the Company from the date of acquisition.

The purchase price allocation for Automic, which was finalized during the third quarter of fiscal year 2018, and Veracode, which was finalized during the fourth quarter of fiscal year 2018, is provided within the table below.



(dollars in millions)	Automic			Veracode			Estimated Useful Life
Finite-lived intangible assets ⁽¹⁾	$	174		$	99		2-12 years
Purchased software	273			240			1-8 years
Goodwill	303			336			Indefinite
Deferred tax liabilities, net	(92		)	(33		)	—
Other assets (liabilities), net ⁽²⁾	17			(24		)	—
Purchase price	$	675		$	618


(1)	Includes customer relationships and trade names.


(2)	Includes approximately $34 million and $16 million of cash acquired from Automic and Veracode, respectively.

The excess purchase price over the estimated value of the net tangible and identifiable intangible assets was recorded to goodwill. The allocation of the purchase price to goodwill was predominantly due to synergies the Company expects to achieve through integration of the acquired technology with the Company’s existing product portfolio and the intangible assets that are not separable, such as assembled workforce and going concern. The goodwill relating to the Company’s acquisitions of Automic and Veracode was not deductible for tax purposes and was allocated to the Enterprise Solutions segment. During fiscal year 2018, the Company recorded $63 million of additional deferred tax assets relating to Veracode based on further review of their historical tax records.

Since Automic was acquired at the beginning of the fourth quarter of fiscal year 2017, the Consolidated Statement of Operations for fiscal year 2017 included approximately three months of revenue and expenses associated with this acquisition. The Consolidated Statement of Operations for fiscal year 2017 included total revenue of approximately $25 million and net loss of approximately $2 million from Automic from the date of acquisition through March 31, 2017. Veracode was acquired on the last day of fiscal year 2017 and did not contribute any revenue or operating expenses to the Company’s Consolidated Statement of Operations for fiscal year 2017.

The Consolidated Statement of Operations for fiscal year 2018 included total revenue of approximately $218 million and net loss of approximately $66 million from Automic and Veracode through their anniversary dates.

Transaction costs for the Company’s fiscal year 2017 acquisitions, which were primarily included in “General and administrative” in the Company’s Consolidated Statements of Operations, were approximately $10 million for fiscal year 2017.

The unaudited pro forma combined financial information in the table below summarizes the results of operations for the Company, Automic and Veracode as though the companies were combined as of the beginning of fiscal year 2016. The pro forma financial information presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal year 2016, nor does it attempt to represent the results of future operations of the combined entities under the ownership and operation of the Company. The pro forma results of operations also do not include any cost savings or other synergies that may result from these acquisitions or any estimated costs that have been or will be incurred by the Company to integrate the acquired assets.

The pro forma results below were based on estimates and assumptions. The pro forma financial information for all periods presented also includes the business combination accounting effects resulting from these acquisitions, including the amortization charges from acquired intangible assets and other purchase accounting adjustments, employee retention costs and the related tax effects as though the Company, Automic and Veracode were combined as of the beginning of fiscal year 2016.



	Year Ended March 31,
(in millions, except per share amounts)	2017		2016
	unaudited
Total revenue	$	4,279	$	4,215
Income from continuing operations	$	706	$	652
Basic income from continuing operations per common share	$	1.68	$	1.51
Diluted income from continuing operations per common share	$	1.68	$	1.51

The pro forma effects of the Company’s other fiscal year 2017 acquisitions on the Company’s revenues and results of operations were considered immaterial.

On July 8, 2015, the Company completed its acquisition of Rally Software Development Corp. (“Rally”), a provider of Agile development software and services. The acquisition of Rally broadens the Company’s solution set and capabilities to better serve customers in the application economy. Pursuant to the terms of the acquisition agreement and related tender offer, the Company acquired 100% of the outstanding shares of Rally common stock for approximately $519 million. The purchase price allocation for Rally, which was finalized during the first quarter of fiscal year 2017, is provided within the table below. The results of operations of Rally are reported predominantly in the Company’s Enterprise Solutions segment and were included in the consolidated results of operations of the Company from the date of acquisition.

The purchase price allocation for the Company’s other acquisitions during fiscal year 2016, including the second quarter acquisition of Xceedium, Inc. (“Xceedium”), is included within the “Other Fiscal Year 2016 Acquisitions” column below. The acquisition of Xceedium and the Company’s other acquisitions during fiscal year 2016 were immaterial, both individually and in the aggregate.



(dollars in millions)	Rally			Other Fiscal Year 2016 Acquisitions			Estimated Useful Life
Finite-lived intangible assets ⁽¹⁾	$	78		$	14		1-15 years
Purchased software	178			96			5-7 years
Goodwill	257			59			Indefinite
Deferred tax liabilities, net	(45		)	(24		)	—
Other assets, net ⁽²⁾	51			2			—
Purchase price	$	519		$	147


(1)	Includes customer relationships and trade names.


(2)	Includes approximately $13 million of cash and approximately $48 million of short-term investments acquired relating to Rally.

The excess purchase price over the estimated value of the net tangible and identifiable intangible assets was recorded to goodwill. The allocation of purchase price to goodwill was predominantly due to synergies the Company expects to achieve through integration of the acquired technology with the Company’s existing product portfolio and the intangible assets that are not separable, such as assembled workforce and going concern. The goodwill relating to the Company’s fiscal year 2016 acquisitions was not deductible for tax purposes and was allocated to the Enterprise Solutions segment. The pro forma effects of the Company’s fiscal year 2016 acquisitions on the Company’s revenues and results of operations during fiscal year 2016 were considered immaterial.

The Consolidated Statement of Operations for fiscal year 2016 included total revenue of approximately $97 million and net loss of approximately $33 million from Rally and Xceedium from the date of acquisition through March 31, 2016. Revenues and results of operations since the date of acquisition for the Company’s other fiscal 2016 acquisitions were considered immaterial.

Transaction costs for the Company’s fiscal year 2016 acquisitions, which were primarily included in “General and administrative” in the Company’s Consolidated Statement of Operations, were approximately $20 million for fiscal year 2016.

The Company had approximately $11 million and $12 million of accrued acquisition-related costs at March 31, 2018 and 2017, respectively, related to purchase price amounts withheld subject to indemnification protections.